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Addressing the retirement confidence gap

The client-adviser relationship can sometimes feel like walking a tightrope, with advisers offering a steadying hand as clients step towards their future. The end destination ought to be a comfortable and enjoyable retirement, but there are inevitably going to be difficult moments to navigate en route.

Factors such as market volatility, potential illness, and inflation might get in the way and present periods of stress. Advisers, however, can use a number of tools to help keep their clients from toppling over on their journey. Central to this is building a trusted and strong relationship.

This is particularly pertinent when it comes to the retirement confidence gap that has been identified by the Embark Investor Confidence Barometer.

Our first Barometer, published at the beginning of last year, discovered a significant gap between advisers and their clients in relation to their retirement prospects. It found that 60% of advised investors were confident they will have enough money to meet their retirement plans. However, only 28% of advisers told us that they expected more than half of their clients to have the money to achieve their retirement plans.

The latest Barometer, released in March this year, found that both these figures had risen, to 78% and 34%, respectively. Although advisers appear to have become slightly more optimistic about their clients’ retirement prospects, the confidence gap between the two has actually widened. So, why are advised investors so much more optimistic than their advisers?

The confidence gap

Challenges around effective communication have been suggested as another possible reason for the discrepancy. Investor optimism can make it difficult for advisers to get through to their clients and cool their enthusiasm, yet this idea sits at odds with the 84% of surveyed advised investors who said they were satisfied with their advisers’ communication.

So, adviser-client relationships appear to be in rude health. But, is there more advisers can do to deliver the reality check their clients might need?

Here lies the balancing act. On the one hand, advisers don’t want their clients to worry, but, on the other, it’s their duty to make them aware of potential difficulties that may lie ahead. If they can narrow this confidence gap now, it will likely help ensure their clients can reach their intended destination, ultimately benefitting both investors and advisers in the long-term.

Addressing the gap

It may seem obvious, but going back to basics is always a good starting point. For example, we know that more personalised communication lands with greater impact. A 2017 study in the Journal of Financial Planning revealed that advisers who sent frequent greeting cards and personal notes saw higher levels of client satisfaction.

A positive outcome of the pandemic was the ability of advisers to deliver a more tailored approach to their communications by using technology. The latest Barometer found that a third of advisers believe that their clients are now more digitally savvy. As a result, many advisers and their clients rapidly embraced new ways of working and new technologies. One example of this is the implementation of automated nudges. These have helped advisers to produce more bespoke communications.

Most importantly, clients appear to be valuing this digital communication. Over 40% told us that a positive effect of the pandemic was the opportunity to have more online engagement with their adviser. Clearly, this will vary from client to client, and finding the right channels and moments for each individual is vital.

Higher quality and more frequent opportunities to engage with clients could present a chance for conversations to address any gap in retirement expectations. Advisers won’t want to appear overly pessimistic or cause clients to worry about their future, but, if an honest – yet difficult – conversation is needed to help secure a better outcome in retirement, then ultimately it’s the right thing to do.

What does the future hold?

A lack of alignment between the retirement confidence levels of advisers and advised investors is problematic. The use of new and tailored channels of communication may help create opportunities for advisers to bridge the gap. With client satisfaction surging to the highest it has been since the first Embark Investment Confidence Barometer, it is possible that the climate for these conversations has never been better as advisers seek to guide clients across the tightrope.

You can read more about the Embark Investor Confidence Barometer here

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